Foreign Aid 1

Jeremy Springman

University of Pennsylvania

Global Development: Intermediate Topics in Politics, Policy, and Data

PSCI 3200 - Spring 2025

Logistics

Assignments and Upcoming

Today
- Briggs (2016)
- Briggs (2021)
Wednesday (4/9)
- More foreign aid readings
- Data Assignment 1 (due Friday)
Monday (4/14)
- Foreign Aid Obituary
- Feedback on FP Extension

Agenda

Finishing up interaction terms
Overview of Foreign Aid
Briggs (2016)
Briggs (2021)
Data Assignment 1

Finishing up interaction terms

Interaction Terms

\[ Y_i = \alpha + \beta_1 X_{i1} + \beta_2 X_{i2} + \beta_3 X_{i1}*X_{i2} + \epsilon_i \]

Example: Continuous outcome with two binary predictors

\(\alpha\): Intercept when \(X_{i1}\) and \(X_{i2}\) are 0
\(\beta_1\): Slope when \(X_{i2} = 0\)
\(\beta_2\): Difference in \(\alpha\) between \(X_{i2}=0\) and \(X_{i2}=1\)
\(\beta_3\): Difference in \(\beta_1\) between \(X_{i2}=0\) and \(X_{i2}=1\)

Overview of Foreign Aid

Aid Disbursements

Aid Received

Aid Distribution

Aid Impacts

Debates Around Aid

Economic growth
Welfare
State capacity
Poverty alleviation
Accountability

Debates Around Aid

Budget support vs Project Aid
- Governments have information advantages
- Government budgets are subject to massive leakage (Reinikka & Svensson, 2004)
Accountability
- Fungibility
- Donor vs recipient control

Aid Distribution

Briggs (2016)

Research Question

Is development aid targeted to the poorest citizens?

Donors have a stated preference for using aid to alleviate extreme poverty
Pressure may undermine this targeting
- Donor foreign policy objectives
- Donor ignorance
- Recipient politics

Theory

Why is it easier for multilateral donors to send aid to poorer countries?

Multiple stakeholders mean aid must flow to places where preferences overlap
Donor preferences are likely to overlap in the places with the greatest need

Case Selection

Most likely scenario for effective targeting:

Commitments rather than disbursements
Multilateral donors
Project aid

Project aid must be proximate

Aid is typically providing local public goods

Measurement

DV: Aid projects per region
- World Bank and ADB 2009-2010
- Each region’s share (with and without cost weights)
- Total dollar value
IV: Wealth quintiles
- DHS 1999-2008
- Relative wealth composition of each region (% of each quintile living in each region)

Research Design

Unit Fixed Effects
Lagged IV \(\rightarrow\) DV
Control for obvious pre-treatment confounders
What is his “most likely” design?
Does he “identify” causal effects?

Measurement

Findings

Policy Implications

Majority of people live in middle-income countries, but is that where we should send aid?

Briggs (2021)

Research Design

Conjoint survey experiment

Sample: World Bank Task Team Leaders
Task: select projects based on important characteristics
Outcomes: Client desirability, WB approval, implementation, impact

Research Question

What pressures shape the distribution of aid?

Which projects the client government would prefer
Which projects would be easier to get WB approval
Which projects would be easier to implement
Which projects would get better internal ratings
Which project would be better for development

Findings

Client government desireability

Positive: Hometown of the recipient country’s President
Positive: Government implemented
Neutral: Income of project location, urban

Ease of approval

Positive: poorer places was easier to get approved
Negative: presidential hometowns
Negative: projects with smaller budgets

Findings

Development impact

Positive: Poorer and rural areas

Ease of implementation

Negative: Poorer and remote projects
Getting more projects approved was either extremely or very important to their career

Findings